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Five Can't Miss Physician Contracting Compliance Tips

March 2014

MD Ranger prepared a quick list of compliance tips for hospital and health system executives dealing with physician contracts for administrative, leadership, on-call, and hospital-based services. These tips will help shape a new physician contracting compliance program or refine an existing program. Apply them to create a successful compliance program to help prevent Stark and AKS violations.

1) Establish a rigorous contract management process and assign staff to oversee day to day management of your physician contracts.

Contract management may be straightforward in terms of processes and best practices, but the trick is ensuring proper execution and consistent application of procedures. Every compliance program should be incorporating the following contract management elements:

  • Have a contract for all physician arrangements (even non-monetary arrangements)
  • Organize your contracts by date, party, and expense
  • Alert your team to expiring contracts well in advance of expiration
  • Establish a renewal process that includes:
    • Reviewing or updating a contract
    • Checking the rate against relevant benchmarks
    • Negotiation strategy
    • Necessary approvals
    • Strategic contract management

It is also important to identify and prevent the development of silos that mask overall payments to individual physicians or groups for similar services. Contract management teams should work across the organization as a true cross-functional team so that there is a comprehensive appreciation of contracting costs.

2) Create a document that defines your physician contract compliance program and your process for establishing FMV.

In this document, describe the procedures for screening physician contracts and, most importantly, the steps you will take to ensure and document compliance for all physician financial arrangements. Within the document, outline:

  • Accountable executive(s)
  • Day-to-day staff and their responsibilities
  • Strategic goals
  • FMV documentation process
  • When to seek outside review

3) Communicate your compliance process with stakeholders and employees who are involved.

Ensure that there is an accountable executive for the program, and that they have communicated the compliance process to anyone involved in physician contracts. Encourage transparency, and follow up on any concerns expressed by staff.

4) Determine how you'll establish and document FMV and commercial reasonableness for physician payment rates.

We recommend having a discussion to define what's best for your organization while considering cost, consistency, and efficiency. Research your options for published benchmarks, tools, and consultants, within the context of your organization's goals and budget objectives. After you've made a decision, document your approach and record the step-by-step process.


  • Cost, efficiency, and scope of data (services, hours, percent paying, tools)
  • What percent of hospitals are paying for comparable services?
  • How many and how complex are your contracts?
  • What are your corporate, compliance, and cost reduction objectives?

The three options for establishing FMV are:

  • Market Data
  • Internal or external proprietary formulas
  • Internal or external ad hoc FMV opinions (valuations)

Options to document compliance:

  • Written FMV opinions
  • Contract-specific benchmark comparisons (e.g. MD Ranger individual contract reports shown with market range and specific contract's rate)

March BE Graphic

  • Internal certification document with market data
  • Combination of the above

5) Analyze your contracts in aggregate to understand if you're overspending or consistently setting rates that are too high.

Use benchmarks to compare your organization's total expenditures to overall spending by peers. MD Ranger publishes data on total hospital spending annually by service for physician contracts and provides each of our subscribers with a report of their facilities' contracts and how they compare to our benchmarks.

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